When we think of investing we usually think of stocks and shares, or where our pensions might be invested, but the investment universe is broad. Art, antiques, handbags, wine – there is an investment market for anything that is collectible, in demand and appreciating in value.
I have owned a classic car since 2018 – a 1970s Panther Lima. For me, I bought the car for enjoyment rather than investment but, since I have owned it, the value has appreciated by around 40% with around a 20% cost on maintenance over the period.
If you are thinking of buying a classic car with a view on making a profit or just have a passion for it, here are some of the things worth considering.
Pros of classic car investments
Owning a physical asset
One of the things I enjoy the most is taking the car out for a spin and exploring new destinations. Investing in a physical asset, particularly one that gets you from A to B in style, allows you to use your investment to tick off some of those lifegoals, making memories along the way.
In a sentence, the greatest advantage for me of investing in classic cars is that you get to drive and enjoy your physical asset, a priceless and immeasurable value.
No Capital Gains Tax
If you’re looking to make a profit on your car purchase, there is generally no Capital Gains Tax on the gains made on a classic car, as this is seen as a ‘wasting asset’ therefore an exemption is applied.
This is great news because if you pick the right car at the right age, you can see a large growth in price.
Many classic cars were manufactured in limited numbers and are no longer being produced, therefore they become rare and valuable collectors’ items. When this happens and a hype for that make or model is generated, the price somebody is willing to pay for that extraordinary automobile can significantly increase its value.
I will say, not all cars increase in value, however. Again, usually the rarest cars with the lowest production numbers tend to keep their value so it’s worth doing your research around this. If you are looking to make a profit and the car you are considering purchasing isn’t one of them, you might want to think again.
Cons of classic car investments
As with any investment, there are some downsides to investing in classic cars, and risks worth weighing up before you make a decision.
Pit stop prices
Let’s say your car is special edition and no longer in distribution anywhere in the world, what does that mean for maintenance costs and purchasing the right parts when needed?
Take it from me, keeping these prized assets in working order and in good condition can be an expensive commitment – repairing and restoring your mid 1960s Corvette does not come cheap. If you are buying classic cars to sell on, your profit margins may suffer if you’ve had to put in more money than you expect on the general upkeep of the car.
Miles of depreciation
When you’re driving your investment, you’ll be racking up the mileage on your vehicle. Mileage detracts from value, so while it’s a wonderful benefit that you can get out and enjoy showing off your Ford Mustang Shelby GT on a Sunday afternoon, remember the depreciation that inevitably comes with it.
Lastly, it’s worth knowing that the transaction costs of buying and selling classic cars can be high. You can also be taxed by HMRC if you are seen as ‘trading’ and frequently buying and selling, and the tax can start eating into your profit margin.
As with any investment strategy, balancing the pros and cons before entering into it is vital but if you choose to take this route, owning a classic car, whether for profit or just the personal enjoyment, can be a highly rewarding experience.